CRTO is growing earnings at over 300%. Saul, their Q4 press release says 2014 Adjusted EBITDA was 79 million euros and for 2015 management is guiding to between 108 million and 115 million. Even at the top range, that’s less than 50% growth.
Now if they flat-lined at 0.37 all year in 2015, with no sequential growth at all, they’d make 1.48 and be up 74%. Yes, I think they are lowballing. I don’t think they will be up 300% again, obviously. But it’s hard to imagine them up less than 100% in earnings for 2015.
Yes, Saul, we agree about evaluating the business.
Regarding the FOREX, it really come down to where the business operates, not what currency they report in. Currency exchange rates will already get reflected in the stock price. As an extreme example imagine a company that reports in EUR but operates 100% in the U.S. Such a company’s stock price will move based on how the business is doing and also automatically adjust based on the exchange rate. So if the EUR declined 10% versus the USD then the stock price in EUR would rise 10% because its business is entirely in the U.S. Therefore, you’re not really investing in EUR even though the company reports in EUR. In the case of CRTO, we are investing 48% in EMEA, 35% in the Americas, and 17% in APAC. If most of the payroll is in France then some expenses will be lower (relative to the blended revenue) when the EUR is weak and higher when the EUR is strong.
Looking at the figures in euro is a way to see how the company is doing (versus actual dollars to see how one’s investment is doing). The reason I suggested that conversion to constant dollars in addition for seeing how the company is doing is that one may be more comfortable seeing things in terms of dollars if dollars is one’s everyday currency.
This would be more obvious if the investment was in a Japanese company since many who trade normally in dollars would not be used to evaluating growth in Yen. To be sure, the growth percentages are going to be the same, regardless of the currency, but one might react differently to 3X growth from 1 cent to 3 cents compared to 3X growth from $100 to $300.